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A Macro-Theoretic Model of the Chinese Economy

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  • Dixon, Huw David

Abstract

A stylized model of the Chinese economy is developed with three production sectors: agriculture, non-traded industrial goods, and industrial exports. The state purchases food from farmers by dual-track pricing; urban food sales are subsidized through ration coupons. Marginal prices clear markets except that currency controls constrain the availability of intermediates, the only imports. Devaluation is found to stimulate real variables, but deflates money variables; the reverse occurs with monetary expansion or raising the plan-track food procurement price. Lowering urban food subsidies or raising enterprise taxation reduces the budget deficit, reduces open and disguised unemployment, and deflates nominal prices.

Suggested Citation

  • Dixon, Huw David, 1996. "A Macro-Theoretic Model of the Chinese Economy," CEPR Discussion Papers 1370, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:1370
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    Citations

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    Cited by:

    1. Bennett, John & David Dixon, Huw, 2001. "Monetary Policy and Credit in China: A Theoretical Analysis," Journal of Macroeconomics, Elsevier, vol. 23(2), pages 297-314, April.
    2. Sarajevs, Vadims, 1999. "Macroeconomic model of transition economy : A stochastic calculus approach," BOFIT Discussion Papers 7/1999, Bank of Finland, Institute for Economies in Transition.
    3. Yin, Xiangkang, 1998. "The Macroeconomic Effects of Waiting Workers in the Chinese Economy," Journal of Comparative Economics, Elsevier, vol. 26(1), pages 150-164, March.
    4. John Bennett & Huw Dixon & Helen X.Y. Hu, 2008. "The Effects of Reforming the Chinese Dual-Track Price System," CEDI Discussion Paper Series 08-14, Centre for Economic Development and Institutions(CEDI), Brunel University.
    5. Bennett, John & Dixon, Huw & Hu, Helen X.Y., 2013. "The transition from dual-track pricing to a market system: Winners and losers," Economic Systems, Elsevier, vol. 37(1), pages 30-44.
    6. Fung, Michael K. Y. & Ho, Wai-Ming & Zhu, Lijing, 2000. "Stagflationary effect of government bond financing in the transforming Chinese economy: a general equilibrium analysis," Journal of Development Economics, Elsevier, vol. 61(1), pages 111-135, February.

    More about this item

    Keywords

    China; Open Economy; Transition;

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • P21 - Economic Systems - - Socialist Systems and Transition Economies - - - Planning, Coordination, and Reform
    • P52 - Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies

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